Wednesday, July 21st, 2010...11:04 pm

Digital Lebronomics

There’s been a firestorm of emotions, opinions and reactions (including the official Littyhoops take) in response to Lebron James decision to “take his talents to South Beach” and join the Miami Heat. James signed for approximately $15 million less than the maximum NBA contract in order to team with all-stars Dwayne Wade and Chris Bosh. While many fans and pundits argue that King James has tarnished his brand, the prevailing notion is that if Lebron is able to lead the Heat to championships he will build his legacy and financially benefit through additional sponsorship and endorsement opportunities.

This week Sports Illustrated published their 2010 Fortunate 50 highest-earning American athletes and ranked Lebron as the fourth overall with total revenue of over $45 Million. Two-thirds of that revenue is generated by sponsorship and marketing deals with corporate partners that include Nike, Sprite, Glaceau VitaminWater, State Farm, Upper Deck, and McDonald’s. During the Knicks futile quest to sign James, the team presented an Interbrand report that predicted that Lebron could generate over one billion dollars during his career if he plays in New York City.

Most of Lebron James’ current deals are traditional sponsorships which typically include television commercials, promotional appearances and the marketing rights to use an athlete’s name and likeness. Digital rights are often included as part of a bundled package or as added value. Digital is not yet driving the revenue. Interbrand didn’t even bother to include digital revenue when calculating Lebron’s Billion.

This will change. In the next decade Lebron will derive substantial revenue through digital sponsorships.

Last week’s “Decision” resulted in a healthy dose of digital growth in the LeBusiness. The new LebronJames.com website and email newsletter launched. The “Decision” television special on ESPN was sponsored by Microsoft Bing in a distinctly digital sponsorship. The Lebron James Facebook page has been “liked” by 2.8MM fans. In just a few weeks on twitter @KingJames gained over 490K followers. Lebron and his marketing team were able to leverage the media coverage and fan frenzy as a catalyst to aggregate a digital audience. Now they will try to monetize it.

LebronJames.com may attract additional sponsorship as it did with Bing but with limited monthly traffic (less than 500K uniques) there is a ceiling on direct digital advertising. Lebron does have a considerably bigger audience on the major social media platforms. Twitter’s direct monetization mechanisms are still immature but popular athletes on twitter are rumored to receive $5K-$10 per sponsored tweet (via Ad.ly). Facebook pages are great promotional opportunities and have become more integral in all media campaigns. Innovative Facebook programs like Amare Stoudemire selling playoff tickets for the Suns through his own Facebook page may also be a new revenue stream in the future.

Lebron’s announcement also signaled the dawn of the individual star athlete as a media entity. Recent trends have seen professional teams create regional sports networks, and professional sports leagues create their own media businesses. Is the next evolution for individual athletes to form their own media companies?

Perhaps it’s already happening with the massive media coverage of star figures such as Tiger Woods and Lebron James. Despite critical reaction, the “Decision” drew 9.9 million viewers on ESPN. Interest in Lebron is at record highs and his new digital media platforms allows him to directly boradcast to his fans (rather than through the NBA or even the Miami Heat).

If Lebron James (or at least his brand) is looked upon as a media company the digital revenue opportunities go far beyond sponsorship. Weekly Youtube video podcasts, twitter contests, email newsletters, memorabilia sales, online auctions and e-commerce opportunities all begin to add up. It becomes conceivable that Lebron can generate an additional $10MM – $20MM per year through digital business with new sponsors or incremental dollars from current brand partners. Some of these digital opportunities don’t even need Lebron’s personal time which makes it even easier to scale. This digital revenue alone can more than makes up for the increased salary that he passed up.

I’m interested to see what happens on and off the court in Miami. If Lebron is successful at building out his own media property it’s a telling sign of a power shift in professional sports. I’m not sure how David Stern, the owners or even the fans will react. Stern didn’t seem to happy with Lebron’s “Decision”. But if Lebron, D-Wade and Bosh continue to stick together they may soon have a healthy dose of power and influence to match their ever-growing paychecks. But first, let’s see them get some rings!